TIDMLOK
RNS Number : 7423K
Lok'n Store Group PLC
26 April 2010
26 April 2010
("Lok'nStore" or "the Group")
Interim Results
for the six months to 31 January 2010
Lok'nStore Group Plc, a leading company in the UK self-storage market announces
interim results for the six months ended 31 January 2010.
Financial Highlights
* Revenue up 1.8% to GBP5.19 million - (GBP5.09 million: six months to 31.01.09)
* Group EBITDA up 14.5% to GBP1.45 million - (GBP1.27 million: six months to
31.01.09)
* Operating profit up 77.0% to GBP438,058 - (GBP247,547: six months to 31.01.09)
* Existing GBP40 million bank facility until 2012. GBP11.9 million undrawn
* Adjusted NAV* GBP2.10 per share up 1.5% over period and up 5%
year-to-year(31.01.09: GBP2.00 per share, 31.07.09: GBP2.07 per share)
*Based on Directors' valuation, before deferred taxation.
* Interim dividend proposed 0.33 pence per share (2009: Nil** pence per share)
** 2009 interim dividend waived but a final dividend of 1 pence per share paid
to maintain total annual dividend at 1 pence per share.
Operational Highlights
* Store EBITDA up 4.9% to GBP2.16 million (GBP2.06 million: six months to
31.01.09)
* Store EBITDA margin 41.8% (six months to 31.01.09: 40.7%)
* Occupancy 558,514 sq ft up 10.2% over last year (31.01.09: 506,704 sq ft)
* Self-storage prices up 2.8% over period
* Ancillary income up 24.6%
* Operating costs reduced by 1.5% year-to-year (x months to 31.01.09
* Store EBITDA margin (same stores over 100 weeks) 43.9% (six months to
31.01.09: 43.5%)
Property Highlights
* Property portfolio valued at GBP78.4 million (31.01.09: GBP76.8 million)
* Loan to value ratio of 30.9%***(31.01.09:33.2%)
* *** Calculation based on net debt of GBP24.2 million (31.01.09: GBP25.5
million)
*
* Planning permissions in place on all stores in pipeline (4 stores)
Andrew Jacobs, Chief Executive, said:
'Lok'nStore has performed well in the first half of this year. We have increased
turnover, and driven ancillary revenues markedly higher. Store EBITDA and Group
EBITDA are sharply higher and we have converted a loss before tax last year into
a profit before tax. Occupancy has grown 10.2% year-on-year and we have
increased overall margins with a combination of price increases and reduced
operating costs.
We have a flexible business model backed by substantial and increasing property
assets which generate cash. While economic conditions appear to have stabilised
we will continue to focus on driving the cash flow from the existing portfolio
by increasing occupancy, revenues, and controlling costs. We are continually
reviewing our building and acquisition strategy in light of market and economic
conditions.
The UK self-storage remains an attractive growth market and Lok'nStore is well
positioned within it.'
- Ends -
Press Enquiries:
+--------------------------+----------------------+--------------------+
| Andrew Jacobs, CEO | Lok'nStore | Tel: 01252 521010 |
+--------------------------+----------------------+--------------------+
| Ray Davies, Finance | Lok'nStore | |
| Director | | |
+--------------------------+----------------------+--------------------+
| Jonathon Brill/Billy | Financial Dynamics | Tel: 020 7831 3113 |
| Clegg/Ed Westropp | | |
+--------------------------+----------------------+--------------------+
| Nick Tulloch/Ben Wells | Arbuthnot | Tel: 020 7597 4000 |
+--------------------------+----------------------+--------------------+
Overview
Lok'nStore has performed well in the first six months of this year. We have
increased turnover and driven ancillary revenues markedly higher. Store EBITDA
and Group EBITDA are sharply higher and we have converted a loss before tax last
year into a profit before tax. Occupancy has grown 10.2% year-on-year and we
have increased overall margins with a balanced combination of price increases
and reduced operating costs. Our prices for self-storage unit are up 2.8% over
the period.
Backed by substantial property assets Lok'nStore has achieved an overall margin
improvement year-on-year. Cash flow has increased and we have made additional
cost savings of 1.5% year-on-year which further underpin the margin improvement.
Capital expenditure remains curtailed for the time being and we will continue to
manage the business on a conservative basis but have the flexibility to respond
quickly in line with a recovery in the wider economy.
At 31 January 2010 the management valued the property portfolio resulting in an
adjusted net asset value of GBP2.10 per share (31.01.09: GBP2.00 per share). The
portfolio will be externally valued at the July 2010 year end.
We continue to comply comfortably with all banking covenants on our existing
bank facility which runs until February 2012. We currently have GBP11.9 million
of the facility undrawn and GBP3.9 million of cash.
Sales and Earnings Performance
Revenue for the period was GBP5.19 million up 1.8% year-on-year (GBP5.09
million: six months to 31.01.09). Total store EBITDA has increased 4.9% to
GBP2.16 million (31.01.09: GBP2.06 million). Group EBITDA was up 14.5% at
GBP1.45 million (31.01.09: GBP1.27 million).
Operating profit for the period was up 77% to GBP438,058 compared with
GBP247,547 for the corresponding period, and GBP318,591 for the year ended
31.07.09. Pre-tax profit for the period was GBP190,626 compared with a loss of
GBP480,162 for the corresponding 2009 period. Basic profit per share was
0.24pence per share (31.01.09: 1.92 pence loss per share). On a diluted basis
profit per share was 0.24 pence per share (31.01.09: 1.92 pence loss per share).
The cash flow of the operating business has remained strong, with store earnings
before interest, tax, depreciation and amortisation (Store EBITDA) up 14.9% at
GBP2.16 million (GBP2.06 million: six months to 31.01.09).
Breakdown of Performance of Stores
+--------------------------------+------------+-------+------+-------+-------+
| | | January | | |
| | | 2010 | | |
+--------------------------------+------------+--------------+-------+-------+
| Store analysis Weeks old | Pipeline** | Under | 100 | Over | Total |
| | | 100 | to | 250 | |
| | | | 250 | | |
+--------------------------------+------------+-------+------+-------+-------+
| Six months ended 31 January | | | | | |
| 2010 | | | | | |
+--------------------------------+------------+-------+------+-------+-------+
| Sales (GBP'000) | - | 250 | 646* | 4,268 | 5,164 |
+--------------------------------+------------+-------+------+-------+-------+
| Stores EBITDA (GBP'000) | - | 0 | 386 | 1,771 | 2,157 |
+--------------------------------+------------+-------+------+-------+-------+
| EBITDA margin (%) | - | 0 | 59.7 | 41.5 | 41.8 |
+--------------------------------+------------+-------+------+-------+-------+
| As at 31 January 2010 ('000 sq | | | | | |
| ft) | | | | | |
+--------------------------------+------------+-------+------+-------+-------+
| Freehold and long leasehold | 143 | 69 | 128 | 439 | 779 |
+--------------------------------+------------+-------+------+-------+-------+
| Leasehold | - | 40 | - | 407 | 447 |
+--------------------------------+------------+-------+------+-------+-------+
| Maximum Net Area | 143 | 109 | 128 | 846 | 1,226 |
+--------------------------------+------------+-------+------+-------+-------+
| Total Number of stores | | | | | |
+--------------------------------+------------+-------+------+-------+-------+
| Freehold and long leasehold | 2 | 1 | 2 | 8 | 13 |
+--------------------------------+------------+-------+------+-------+-------+
| Leasehold | - | 1 | - | 9 | 10 |
+--------------------------------+------------+-------+------+-------+-------+
| Total stores | 2 | 2 | 2 | 17 | 23 |
+--------------------------------+------------+-------+------+-------+-------+
* In respect of the Farnborough store (100 to 250 weeks) total store revenue
includes a contribution receivable from Group Head Office in respect of the
space and facilities the store provides for the Head Office function. This
income to the store and the corresponding charge to Head Office are netted down
in the Group revenue figures.
** Ancillary revenues from pipeline sites is not reported here (refer note 3
revenue and segmental information).
Overall EBITDA margins across all stores improved to 41.8% from 40.7%.
Pricing
Over the period Lok'nStore has increased average prices for self-storage units
by 2.8% (0.5% year-on-year). In the current environment achieving both occupancy
growth and price increases remains a key objective for the Group and we will
focus on maintaining the right balance while continuing to be vigilant with
operating costs. We believe that we will be able to increase prices by more than
inflation over the medium term although we are conscious of the challenges the
current economic environment presents.
Lok'nStore's average price for self-storage was GBP18.09 per sq ft per annum at
31 January 2010 (GBP18.00: 31.01.09) compared with the average of GBP20.49 for
the UK industry (source: Self-Storage Association Industry Report 2009). Over
the medium term we believe that there is room to continue to increase our prices
while retaining our competitive pricing position in the market.
Despite the economic background we have increased revenue from our ancillary
product lines with packing materials, insurance and other sales increasing 24.6%
year-on-year accounting for 10.2% of revenue in the period (six months ended
31.01.2009: 8.4%).
We continue to heavily promote our insurance to new customers with the result
that 79% of new customers over the period took our insurance. This compares
with 62% of our total customer base who buy our insurance, and so this provides
us with built-in growth in our insurance sales as the customer base rolls over.
Marketing
During the period our marketing budget was increasingly focused on the most
productive media with approximately 3.7% of revenue spent on advertising and
marketing (including postage, printing and stationery) (4.25%: y/e 31.07.09).
The Internet produces an increasing proportion of our enquiries (29% in the
period) and printed directories a decreasing proportion. We continue to allocate
more of our marketing budget towards the Internet with 31% of direct marketing
spend now Internet based (y/e 31.07.09: 21%) and have recently appointed a
leading specialist digital marketing agency. For this period Internet enquiries
were up 61% year-on-year and total enquiries up 17%. We will continue to manage
our marketing budget with a strong focus on cost control and value for money.
While continuing to increase, enquiries from the Internet have a lower
conversion ratio of around 29% (y/e 31.07.09: 27%) than the traditional methods
of telephone and walk-in enquiries and the challenge and the opportunity is to
continue to increase this level. A reflection of the strength of our customer
service is that around 21% of our business is from referrals and from previous
and existing customers. Around 45% of our business comes from passing traffic
so work on the visibility of our stores is also improving response to our
marketing. With their prominent positions, distinctive design and orange
elevations our stores help the profile of the whole Lok'nStore brand. Our store
management are closely involved with sales and marketing initiatives and work
with our Head Office to ensure our marketing expenditure remains targeted and
effective.
Customers
Lok'nStore's business is underpinned by a diverse cross section of both business
and household customers. At the end of January 2010, 36.6% of Lok'nStore's
revenue was from business customers (Jan 2009: 41.2%) and 63.4% was from
household customers (Jan 2009: 58.8%). By number of customers this breakdown was
23% business customers (Jan 2009: 26%) and 77% household customers (Jan 2009:
74%).
Given the tight credit conditions in the wider economy our own credit control
indicators are resilient showing no signs of weakening during the period with
the number of late letters declining and bad debts remaining at very low levels.
The Self-storage Market in the UK
The self-storage market in the UK has grown rapidly over the last decade and
continues to offer a great opportunity, particularly to major operators such as
Lok'nStore. The 2008 UK Self-Storage Association Industry report prepared by
Mintel estimated that the industry had grown by between 8% and 15% annually over
the past five years. In its 2009 update Mintel reported that despite the tough
economic climate, the industry had grown by around 4% over the past year in
terms of available rentable space.
In the UK there are now about 800 primary facilities (not including container
self-storage facilities) and around 28 million rentable square feet - an
increase of more than one million square feet (4%) of space in the last year.
There is 0.5 sq ft of rentable space for each person in the UK. There are over
300 separate companies operating self-storage facilities in the UK with around
45% of the available space in the hands of the larger operators. Lok'nStore is
the fourth largest and one of three quoted storage operators in the UK.
The industry in the UK generates revenues of about GBP360 million per annum and
has over 235,000 customers currently storing.
The more mature US market grew from 2.9 sq ft per head of population in 1994 to
7.4 sq ft in 2009 with over 50,000 facilities throughout the US. There are also
1,300 facilities in Australia and New Zealand representing around 1.1 sq ft per
member of the population. The lower penetration in the UK contrasts with the
difference in population density which is only 32 per sq km in the US against
246 per sq km in the UK. This creates far more pressure to use property
resources efficiently in the UK, which is a notable driver of demand for
self-storage. Combined with this, the restrictive town planning regime in the UK
is a strong barrier to entry in the industry, although in the short to medium
term more property will become available to the self-storage industry as
competitive uses for sites struggle economically.
Property Assets and Net Asset Value
Adjusted net asset value per share at 31 January 2010 was GBP2.10. This is an
increase of 1.5% over the period and an increase of 5% over the previous year.
The increase over the period was due to accumulating operational surpluses.
It is our policy to undertake external independent property valuations of its
trading properties at every 31 July financial year-end; accordingly, the
freehold and leasehold properties have not been externally valued at this
interim period-end. The market for self-storage assets, which is a sub-sector
characterised by a relative scarcity of prime sites, has remained comparatively
resilient to the downturn in commercial property values generally.
The Board remains mindful of the need to accord with the measurement principles
of International Financial Reporting Standards as adopted by the European Union.
After consultation with our external valuers, the Directors considered that
there had been a negligible movement in market yields since the July 2009 year
end and therefore no market yield shift assumption has been applied at 31
January 2010 to our properties externally valued at 31 July 2009. The Directors
therefore consider that it is appropriate to maintain the portfolio valuation
without modification.
As a result, on a same store basis Lok'nStore's freehold and operating leasehold
properties which were independently valued by Cushman & Wakefield ('C&W') at
GBP67.6 million as at 31 July 2009 have been maintained at 31 January 2010 at
GBP67.6 million. Together with our stores under development at cost and our
Maidenhead site (included in non-current property lease premiums), our total
property is valued at GBP78.4 million (31 July 2009: GBP78.4 million: 31 January
2009: GBP76.8 million).
The leasehold properties are carried at historic cost less accumulated
depreciation in the balance sheet. Our development sites are held at cost, less
provision for any impairment, of GBP10.8 million. No impairment charges have
been made. Progress has been made in enhancing this value through a combination
of planning permissions secured and there exists potential for more imaginative
collaborative schemes on certain of our development sites.
This property valuation translates into a net asset value of 210 pence per
share, (31.07.09: 207 pence per share 31.01.09: 200 pence per share), and a net
asset value of 168 pence per share after making full provision for deferred tax
arising on the revaluations (31.07.09: 166 pence per share, 31.01.09: 162 pence
per share).
The deferred tax liability arises on the revaluation of the properties and
rolled over gains arising on historic property disposals. In due course the site
of the existing Reading store is likely to be sold with the benefit of its
permission for residential development and the proceeds may be reinvested in our
new store pipeline. It is not the intention of the directors to make any other
significant disposals of operational self-storage centres in the foreseeable
future. At present, it is not envisaged that any tax will become payable in the
foreseeable future due to the trading losses brought forward and the
availability of rollover relief.
Historically we have valued both our freehold and our leasehold property assets.
Our freehold property assets are formally included in the Balance Sheet at their
fair value, but International Financial Reporting Standards as adopted by the
European Union ('EU') 'IFRS' do not permit the inclusion of any valuation in
respect of our leasehold properties to the extent that they are classified as
operating leases. The value of our operating leases in the valuation totals
GBP9.97 million (31.07.09: GBP9.97 million) (31.01.09: GBP10.64 million).
Instead, we have reported by way of a note the underlying value of these
leaseholds and adjusted our Net Asset Value ('NAV') calculation accordingly to
include their value. This ensures consistent and comparable NAV calculations.
+----------------------------+--------+---------------+-------------+------------+
| | No of | 31 | 31 | 31 July |
| | Stores | January | January | 2009 |
| | | 2010 | 2009 | Valuation |
| | | Valuation | Valuation | GBP |
| | | GBP | GBP | |
+----------------------------+--------+---------------+-------------+------------+
| Analysis of total property | | | | |
| value | | | | |
+----------------------------+--------+---------------+-------------+------------+
| Freehold valued by 'C&W' | 12 | 57,610,000* | 55,370,000* | 57,610,000 |
+----------------------------+--------+---------------+-------------+------------+
| Leasehold valued by 'C&W' | 7 | 9,970,000* | 10,640,000* | 9,970,000 |
+----------------------------+--------+---------------+-------------+------------+
| Sub total | 19 | 67,580,000 | 66,010,000 | 67,580,000 |
+----------------------------+--------+---------------+-------------+------------+
| Sites in development at | 3 | 10,787,686*** | 10,779,794 | 10,779,948 |
| cost | | | | |
+----------------------------+--------+---------------+-------------+------------+
| Total | 22** | 78,367,686 | 76,789,794 | 78,359,948 |
+----------------------------+--------+---------------+-------------+------------+
* Directors' valuation at 31 January 2010 and 31 January 2009.
** Three leasehold stores were not valued as their remaining unexpired terms
were insufficient to yield a value under the Cushman & Wakefield valuation
methodology.
***Under IAS 17 payments made of GBP2.8 million to secure a long lease in
Maidenhead as a development site are classified as an operating lease and are
shown as a non-current asset property lease premium in the balance sheet rather
than within Property, Plant and Equipment. Where reference is made elsewhere to
GBP10.8 million of development sites this is a combination of the GBP2.8 million
Maidenhead site and the GBP8 million of sites in development at cost included in
Property, Plant and Equipment.
+---------------------------------------+--------------+--------------+--------------+
| | 31 | 31 | 31 July |
| | January | January | 2009 |
| | 2010 | 2009 | GBP |
| | GBP | GBP | |
+---------------------------------------+--------------+--------------+--------------+
| Adjusted Net Asset Value Per Share | | | |
| (adjusted NAV) | | | |
+---------------------------------------+--------------+--------------+--------------+
| Analysis of net asset value (NAV) | | | |
+---------------------------------------+--------------+--------------+--------------+
| Total non-current assets | 73,556,422 | 71,988,001 | 73,867,028 |
+---------------------------------------+--------------+--------------+--------------+
| Adjustment to include leasehold | | | |
| stores at valuation | | | |
+---------------------------------------+--------------+--------------+--------------+
| Add: C&W leasehold valuation | 9,970,000 | 10,640,000 | 9,970,000 |
+---------------------------------------+--------------+--------------+--------------+
| Deduct: leasehold properties and | (5,056,381) | (5,687,160) | (5,357,762) |
| their fixtures and fittings at NBV | | | |
+---------------------------------------+--------------+--------------+--------------+
| Add: current assets | 5,364,457 | 3,664,292 | 4,496,731 |
+---------------------------------------+--------------+--------------+--------------+
| Less: current liabilities | (3,268,821) | (2,959,607) | (3,141,589) |
+---------------------------------------+--------------+--------------+--------------+
| Less: non-current liabilities | (28,019,375) | (27,537,355) | (28,001,865) |
| (excluding deferred tax provision) | | | |
+---------------------------------------+--------------+--------------+--------------+
| Adjusted net assets before deferred | 52,546,302 | 50,108,171 | 51,832,543 |
| tax provision | | | |
+---------------------------------------+--------------+--------------+--------------+
| Deferred tax | (10,482,196) | (9,643,545) | (10,248,297) |
+---------------------------------------+--------------+--------------+--------------+
| Adjusted net assets | 42,064,106 | 40,464,626 | 41,584,245 |
+---------------------------------------+--------------+--------------+--------------+
| Shares in issue | Number | Number | Number |
+---------------------------------------+--------------+--------------+--------------+
| Opening shares | 26,758,865 | 26,758,865 | 26,758,865 |
+---------------------------------------+--------------+--------------+--------------+
| Shares issued for the exercise of | - | - | - |
| options | | | |
+---------------------------------------+--------------+--------------+--------------+
| Closing shares in issue | 26,758,865 | 26,758,865 | 26,758,865 |
+---------------------------------------+--------------+--------------+--------------+
| Shares held in treasury | (1,142,000) | (1,142,000) | (1,142,000) |
+---------------------------------------+--------------+--------------+--------------+
| Shares held in EBT | (623,212) | (624,947) | (623,212) |
+---------------------------------------+--------------+--------------+--------------+
| Closing shares for NAV purposes | 24,993,653 | 24,991,918 | 24,993,653 |
+---------------------------------------+--------------+--------------+--------------+
| Adjusted net asset value per share | 168 | 162 | 166 |
| after deferred tax provision | pence | pence | pence |
+---------------------------------------+--------------+--------------+--------------+
| Adjusted net asset value per share | 210 | 200 | 207 |
| before deferred tax provision | pence | pence | pence |
+---------------------------------------+--------------+--------------+--------------+
Net asset values per share are based upon net assets adjusted for the valuation
of the freehold and operating leasehold stores divided by the number of shares
at the year-end. The shares currently held in the Group's employee benefits
trust (own shares held) and in treasury are excluded from the number of shares.
Corporation Tax
There is no corporation tax liability to pay due to the availability of tax
losses. Period-end tax losses available to carry forward for offset against
future profits amount to some GBP4.63 million (31.01.09: GBP5.7 million).
Borrowings, cash flow and interest costs
At 31 January 2010, the Group had cash balances of GBP3.88 million (31.01.09:
GBP2.14 million). The GBP28.1 million of borrowings at 31.01.10 represents
gearing of 65.2% on net debt of GBP24.2 million (31.01.09: 71.8%). After
adjusting for the uplift in value of leaseholds which are stated at depreciated
historic cost in the balance sheet, gearing is 57.6% (31.01.09: 63%). After
adjusting for the deferred tax liability carried at period-end of GBP10.5million
gearing drops to 46% (31.01.09: 51%).
Lok'nStore's cash flow is strong with security deposits taken from customers who
pay four weekly in advance. We retain a legal lien over customers' goods which
can then be sold to cover any unpaid bills. Credit control remains tight with
only GBP21,414 (31.01.09: GBP25,870) of bad debts written off during the period,
down 17.2% from already low levels on the same period last year representing
around 0.4% of revenue (31.01.09: 0.5%).
Cash inflow from operating activities before interest and capital expenditure
was GBP1.3 million (31.01.09: GBP7,887). As well as using cash generated from
operations to fund some capital expenditure, the Group has a five year revolving
credit facility with Royal Bank of Scotland Plc. This provides sufficient
liquidity for the Group's current needs. Period-end borrowings were GBP28.1
million (31.01.09: GBP27.6 million). Net debt was GBP24.2 million (31.01.09:
GBP25.5 million). Interest is payable on the loan at a rate of between 1.25% and
1.35% over LIBOR. Non-utilisation charges are 0.25% on the value of the undrawn
facility. Undrawn committed facilities at the period-end amounted to GBP11.9
million (31.01.09: GBP12.3 million). The facility is secured on the existing
property portfolio. The loan facility runs until February 2012 and during the
period the Group comfortably complied with all debt covenants.
Prevailing economic conditions have caused LIBOR rates to fall significantly and
remain at low levels. Lok'nStore has managed its debt aggressively against this
and the average interest rate paid for the six month period since July 2009 was
1.79% compared to 3.37% for the year to 31 July 2009 and 5.05% for the
corresponding six months ended 31 January 2009. Interest on bank borrowings for
the period decreased to GBP253,364 from GBP769,211 in 2009. The net interest
charge decreased from GBP720,387 to GBP246,980. This will result in a similarly
reduced charge for the second half of our financial year and beyond if these
rates are sustained.
From 1 August 2009 under IAS 23 ('Borrowing Costs') we are required to
capitalise interest against our development pipeline in accordance with changes
to International Financial Reporting Standards. The Group's date of adoption was
1 August 2009, (the first annual period commencing after the IAS 23 effective
date of 1 January 2009). All of the Groups current qualifying assets predate the
date of adoption and accordingly under the transitional adoption arrangements no
borrowing costs have been capitalised against them in the period. A component
of the interest cost incurred by the Group arises from the GBP10.8 million of
development sites that the Group is currently carrying. The interest against
this cost has not been capitalised. If interest had been capitalised, the
Group's adjusted profit would have been approximately GBP98,250 higher for the
period.
While the Group has grown its business through a combination of new site
acquisition, existing store improvements and relocations, it has placed any
further site acquisition and development on hold while the current economic
conditions persist. Consequently, capital expenditure during the period totalled
only GBP0.2 million, which relates to minor works at some stores and planning
and preparatory expenditures at the Reading SGB, Portsmouth North Harbour,
Southampton and Maidenhead sites. Capital expenditure is likely to be limited
over the remainder of the financial year. The Company has no further capital
commitments beyond minor works to existing properties. We will consider
conditions in the wider economy and the UK self-storage market in particular
before committing to any further new developments.
Balance Sheet
Balance sheet net assets at the period-end increased to GBP37.2 million
(31.07.09 GBP36.9 million) (31.01.09: GBP35.5 million) mainly as a result of the
profits earned during the period. Freehold property values were unchanged at
GBP57.6 million compared to GBP57.6 million at 31 July 2009. (Jan 2009: GBP55.4
million). This valuation translates into an adjusted net asset value per share
of GBP2.10 before deferred tax provision (July 2009: GBP2.07) (Jan 2009:
GBP2.00) as reported above.
The Employee Benefit Trust owns 623,212 shares (Jan 2009: 624,947), the costs of
which are shown as a deduction from shareholders' funds. The Company is holding
in Treasury a total of 1,142,000 of its own Ordinary Shares of 1 pence each with
an aggregate nominal value of GBP11,420 for an aggregate cost of GBP2,092,902.
At 31 January 2010 these treasury shares represent 4.27% of the Company's issued
share capital (31.01.09 4.27%). The total number of Ordinary Shares in issue is
26,758,865 (Jan 2009: 26,758,865).
Costs
Administrative expenses amounted to GBP3.62 million for the period (Jan 2009:
GBP3.67 million) a decrease of 1.5%. Premises costs which are the least variable
cost accounted for 48.1% of these costs (Jan 2009: 45.7%), staff costs 36.3%
(Jan 2009: 38.8%) and overheads 15.6% (Jan 2009: 15.5%).
Administration Expenses
+-----------------------+------------+-----------+-----------+-----------+
| | Increase/ | 31 | 31 | 31 July |
| | (decrease) | January | January | 2009 |
| | | 2010 | 2009 | GBP |
| | in | GBP | GBP | |
| | costs(y-y) | | | |
+-----------------------+------------+-----------+-----------+-----------+
| Property costs | 3.7% | 1,739,834 | 1,677,965 | 3,416,305 |
+-----------------------+------------+-----------+-----------+-----------+
| Staff costs | (8.0%) | 1,312,784 | 1,426,695 | 2,715,381 |
+-----------------------+------------+-----------+-----------+-----------+
| Overheads | (0.5%) | 565,237 | 568,130 | 1,146,415 |
+-----------------------+------------+-----------+-----------+-----------+
| Total | (1.5%) | 3,617,855 | 3,672,790 | 7,278,101 |
+-----------------------+------------+-----------+-----------+-----------+
Dividend
In respect of the current year, the directors propose an interim dividend of
0.33 pence per share which will be paid to shareholders on 7 June 2010 to
shareholders on the register on 7 May 2010. The ex-dividend date is 5 May 2010.
The total estimated dividend to be paid is GBP82,479 based on the number of
shares currently in issue as adjusted for net shares held in the Employee
Benefit Trust and held on treasury. This Interim dividend is consistent and
compares to a 2008 total annual dividend of 1 pence per share (comprising 0.33
pence per share by way of an interim dividend and 0.67 pence by way of a final
dividend).
People
At 31 January 2010 we had 106 employees (2009: 105). They are committed and
motivated and help maintain the exemplary levels of friendly service that
Lok'nStore provides to its customers. I would like to thank all of our staff for
their commitment to our business and for their continued hard work.
Outlook
Lok'nStore has performed well in difficult economic conditions and we are
encouraged by current business.
We have a flexible business model which generates cash from an increasing asset
base. While economic conditions appear to have stabilised we will continue to
focus on growing the cash flow from the existing portfolio by increasing
occupancy, revenues, and controlling costs. In the near future we will maintain
our position of constraining new capital expenditure commitments but will adapt
our building and acquisition strategy when we see economic recovery gaining
traction. Self-storage remains an attractive growth market in the UK and
Lok'nStore remains well positioned within it.
Simon Thomas
Chairman
23 April 2010
Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2010
+--------------------------+-------+--------------+-------------+-------------+
| | Notes | Six months | Six | Year |
| | | 31 January | months | ended |
| | | 2010 | 31 | 31 July |
| | | Unaudited | January | 2009 |
| | | GBP | 2009 | Audited |
| | | | Unaudited | GBP |
| | | | GBP | |
+--------------------------+-------+--------------+-------------+-------------+
| Revenue | 3 | 5,187,234 | 5,094,018 | 10,008,678 |
+--------------------------+-------+--------------+-------------+-------------+
| Cost of sales | | (115,463) | (151,268) | (282,664) |
+--------------------------+-------+--------------+-------------+-------------+
| Gross profit | | 5,071,771 | 4,942,750 | 9,726,014 |
+--------------------------+-------+--------------+-------------+-------------+
| Administrative expenses | | (3,617,855) | (3,672,790) | (7,278,101) |
+--------------------------+-------+--------------+-------------+-------------+
| EBITDA | | 1,453,916 | 1,269,960 | 2,447,913 |
+--------------------------+-------+--------------+-------------+-------------+
| Depreciation based on | | (781,749) | (735,320) | (1,571,658) |
| historic cost | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Additional depreciation | | (138,145) | (141,787) | (267,800) |
| based on revalued assets | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| | | (919,894) | (877,107) | (1,839,458) |
+--------------------------+-------+--------------+-------------+-------------+
| Share based payments | | (95,964) | (145,306) | (289,864) |
+--------------------------+-------+--------------+-------------+-------------+
| | | (1,015,858) | (1,022,413) | (2,129,322) |
+--------------------------+-------+--------------+-------------+-------------+
| Operating profit | | 438,058 | 247,547 | 318,591 |
+--------------------------+-------+--------------+-------------+-------------+
| Settlement of Harlow | | - | - | 23,637 |
| build costs | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Loss on sale of motor | | (452) | (7,322) | (7,322) |
| vehicles | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| | | (452) | (7,322) | (16,315) |
+--------------------------+-------+--------------+-------------+-------------+
| Profit before net | | 437,606 | 240,255 | 334,906 |
| finance cost | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Finance income | | 6,384 | 48,824 | 64,326 |
+--------------------------+-------+--------------+-------------+-------------+
| Finance cost | | (253,364) | (769,211) | (1,055,283) |
+--------------------------+-------+--------------+-------------+-------------+
| Profit/ (loss) before | | 190,626 | (480,162) | (656,051) |
| taxation | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Income tax expense | 5 | (129,469) | - | 58,092 |
+--------------------------+-------+--------------+-------------+-------------+
| Profit/ (loss) for the | | | | |
| financial period | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Attributable to owners | | 61,157 | (480,162) | (597,959) |
| of the parent | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Other comprehensive | | | | |
| income before tax | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Increase/(decrease) in | | 375,727 | (9,684,507) | (7,589,590) |
| asset valuation | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Income tax relating to | | (104,430) | 2,787,929 | 2,125,085 |
| (decrease)/increase in | | | | |
| asset valuation | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Total comprehensive | | 271,297 | (6,896,578) | (5,464,505) |
| income for the year, net | | | | |
| of tax | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Total comprehensive | | | | |
| income for the year | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Attributable to owners | | 332,454 | (7,376,240) | (6,062,464) |
| of the parent | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Earnings / (loss) per | 6 | | | |
| share | | | | |
+--------------------------+-------+--------------+-------------+-------------+
| Basic | | 0.24p | (1.92p) | (2.39p) |
+--------------------------+-------+--------------+-------------+-------------+
| Fully diluted | | 0.24p | (1.92p) | (2.39p) |
+--------------------------+-------+--------------+-------------+-------------+
Consolidated Statement of Changes in Equity
For the six months ended 31 January 2010
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| | Share | Share | Other | Revaluation | Retained | Total |
| | capital | premium | reserves | reserve | earnings | GBP |
| | GBP | GBP | GBP | GBP | GBP | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| 31 July 2008 | 267,589 | 698,044 | 13,037,121 | 25,617,674 | 3,290,238 | 42,910,666 |
| Audited | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Decrease in asset | - | - | - | (9,684,507) | - | (9,684,507) |
| valuation | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Income tax relating | - | - | - | 2,787,929 | - | 2,787,929 |
| to decrease in | | | | | | |
| asset valuation | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Other comprehensive | - | - | - | (6,896,578) | - | (6,896,578) |
| income | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Loss for the period | - | - | - | - | (480,162) | (480,162) |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Total comprehensive | - | - | - | (6,896,578) | (480,162) | (7,376,740) |
| income | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Transfer | - | - | - | (141,787) | 141,787 | - |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Share based | - | - | 145,306 | - | - | 145,306 |
| remuneration | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Dividend paid | - | - | (167,446) | - | - | (167,446) |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| 31 January 2009 | 267,589 | 698,044 | 13,014,981 | 18,579,309 | 2,951,863 | 35,511,786 |
| Unaudited | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Increase in asset | - | - | - | 2,094,917 | - | 2,094,917 |
| valuation | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Income tax relating | - | - | - | (662,844) | - | (662,844) |
| to increase in | | | | | | |
| asset valuation | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Other comprehensive | - | - | - | 1,432,073 | - | 1,432,073 |
| income | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Loss for the period | - | - | - | - | (117,797) | (117,797) |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Total comprehensive | - | - | - | (1,432,073) | (117,797) | (1,314,276) |
| income | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Transfer | - | - | - | (253,068) | 253,068 | - |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Share based | - | - | 144,558 | - | - | 144,558 |
| remuneration | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Movement on EBT | - | - | - | - | 1,388 | 1,388 |
| (ESOP) | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| 31 July 2009 | 267,589 | 698,044 | 13,159,539 | 19,758,314 | 3,088,522 | 36,972,008 |
| Audited | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Increase in asset | - | - | - | 375,727 | - | 375,727 |
| valuation | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Income tax relating | - | - | - | (104,430) | - | (104,430) |
| to increase in | | | | | | |
| asset valuation | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Income and expense | - | - | - | 271,297 | - | 271.297 |
| recognised directly | | | | | | |
| in equity | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Profit for the | - | - | - | - | 61,157 | 61,157 |
| period | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Total comprehensive | - | - | - | 271,297 | 61,157 | 332,454 |
| income | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Transfer | - | - | - | (100,348) | 100,348 | - |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Share based | - | - | 95,964 | - | - | 95,964 |
| remuneration | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| Dividend paid | - | - | (249,937) | - | - | (249,937) |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
| 31 January 2010 | 267,589 | 698,044 | 13,005,566 | 19,929,263 | 3,250,027 | 37,150,489 |
| Unaudited | | | | | | |
+---------------------+---------+---------+------------+-------------+-----------+-------------+
All amounts are attributable to owners of the parent.
Consolidated Balance Sheet
31 January 2010
+------------------------------+-------+--------------+--------------+--------------+
| | Notes | Unaudited | Unaudited | Audited |
| | | 31 | 31 | 31 July |
| | | January | January | 2009 |
| | | 2010 | 2009 | GBP |
| | | GBP | GBP | |
+------------------------------+-------+--------------+--------------+--------------+
| Non-current assets | | | | |
+------------------------------+-------+--------------+--------------+--------------+
| Property, plant and | 8a | 70,714,671 | 69,190,741 | 71,040,829 |
| equipment | | | | |
+------------------------------+-------+--------------+--------------+--------------+
| Property lease premiums | 8b | 2,841,752 | 2,797,260 | 2,826,199 |
+------------------------------+-------+--------------+--------------+--------------+
| | | 73,556,423 | 71,988,001 | 73,867,028 |
+------------------------------+-------+--------------+--------------+--------------+
| Current assets | | | | |
+------------------------------+-------+--------------+--------------+--------------+
| Inventories | | 70,091 | 99,264 | 67,104 |
+------------------------------+-------+--------------+--------------+--------------+
| Trade and other receivables | 9 | 1,413,378 | 1,423,242 | 1,200,896 |
+------------------------------+-------+--------------+--------------+--------------+
| Cash and cash equivalents | | 3,880,989 | 2,141,786 | 3,228,731 |
+------------------------------+-------+--------------+--------------+--------------+
| | | 5,364,458 | 3,664,292 | 4,496,731 |
+------------------------------+-------+--------------+--------------+--------------+
| Total assets | | 78,920,881 | 75,652,293 | 78,363,759 |
+------------------------------+-------+--------------+--------------+--------------+
| Current liabilities | | | | |
+------------------------------+-------+--------------+--------------+--------------+
| Trade and other payables | 10 | (3,268,821) | (2,922,347) | (3,141,589) |
+------------------------------+-------+--------------+--------------+--------------+
| Provisions | | - | (37,260) | - |
+------------------------------+-------+--------------+--------------+--------------+
| | | (3,268,821) | (2,959,607) | (3,141,589) |
+------------------------------+-------+--------------+--------------+--------------+
| Non-current liabilities | | | | |
+------------------------------+-------+--------------+--------------+--------------+
| Bank borrowings | 11 | (28,019,375) | (27,537,355) | (28,001,865) |
+------------------------------+-------+--------------+--------------+--------------+
| Deferred tax | 12 | (10,482,196) | (9,643,545) | (10,248,297) |
+------------------------------+-------+--------------+--------------+--------------+
| | | (38,501,571) | (37,180,900) | (38,250,162) |
+------------------------------+-------+--------------+--------------+--------------+
| Total liabilities | | (41,770,392) | (40,140,507) | (41,391,751) |
+------------------------------+-------+--------------+--------------+--------------+
| Net assets | | 37,150,489 | 35,511,786 | 36,972,008 |
+------------------------------+-------+--------------+--------------+--------------+
| Equity | | | | |
+------------------------------+-------+--------------+--------------+--------------+
| Called up share capital | | 267,589 | 267,589 | 267,589 |
+------------------------------+-------+--------------+--------------+--------------+
| Share premium | | 698,044 | 698,044 | 698,044 |
+------------------------------+-------+--------------+--------------+--------------+
| Other reserves | 14 | 13,005,566 | 13,182,427 | 13,159,359 |
+------------------------------+-------+--------------+--------------+--------------+
| Retained earnings | 15 | 3,250,027 | 2,784,417 | 3,088,522 |
+------------------------------+-------+--------------+--------------+--------------+
| Revaluation surplus | | 19,929,263 | 18,579,309 | 19,758,314 |
+------------------------------+-------+--------------+--------------+--------------+
| Total equity attributable to | | 37,150,489 | 35,511,786 | 36,972,008 |
| owners of the parent | | | | |
+------------------------------+-------+--------------+--------------+--------------+
Consolidated Cash Flow Statement
For the six months ended 31 January 2010
+------------------------------+-------+-----------+-------------+-------------+
| | Notes | Unaudited | Unaudited | Audited |
| | | | | Year |
| | | Six | Six | 31 July |
| | | months | months | 2009 |
| | | 31 | 31 | GBP |
| | | January | January | |
| | | 2010 | 2009 | |
| | | GBP | GBP | |
+------------------------------+-------+-----------+-------------+-------------+
| Operating Activities | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Cash generated from | 17a | 1,309,291 | 7,887 | 1,729,068 |
| operations | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Income tax paid | | - | - | - |
+------------------------------+-------+-----------+-------------+-------------+
| Net cash from operating | | 1,309,291 | 7,887 | 1,729,068 |
| activities | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Investing activities | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Purchase of property plant | | (221,360) | (1,422,653) | (2,140,176) |
| and equipment | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Property lease premiums | | (15,553) | (185,426) | 214,365 |
+------------------------------+-------+-----------+-------------+-------------+
| Sale of property, plant and | | 2,900 | 1,755 | 1,755 |
| equipment | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Interest received | | 6,384 | 48,824 | 64,326 |
+------------------------------+-------+-----------+-------------+-------------+
| Net cash used in investing | | (227,629) | (1,557,500) | (2,288,460) |
| activities | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Financing activities | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Increase in borrowings - | | 17,510 | 2,226,129 | 2,690,639 |
| bank loans | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Interest paid | | (196,977) | (848,110) | (1,215,896) |
+------------------------------+-------+-----------+-------------+-------------+
| Equity dividends paid | | (249,937) | (167,446) | (167,446) |
+------------------------------+-------+-----------+-------------+-------------+
| Net cash (used in)/generated | | (429,404) | 1,210,573 | 1,307,297 |
| from financing activities | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Net increase/(decrease) in | | 652,258 | (339,040) | 747,905 |
| cash and cash equivalents in | | | | |
| the period | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Cash and cash equivalents at | | 3,228,731 | 2,480,826 | 2,480,826 |
| beginning of the period | | | | |
+------------------------------+-------+-----------+-------------+-------------+
| Cash and cash equivalents at | | 3,880,989 | 2,141,786 | 3,228,731 |
| end of the period | | | | |
+------------------------------+-------+-----------+-------------+-------------+
Notes to the Interim Results
1 General information
Lok'nStore Plc is an AIM listed company incorporated and domiciled in the United
Kingdom under the Companies Act 1985. The address of the registered office is 1
London Wall, London EC2Y 5AB, UK. Copies of this Interim Statement may be
obtained from the Company's head office at 112, Hawley Lane, Farnborough, Hants.
GU14 8JE or the investor section of the Company's website at
http://www.loknstore.com
2 Basis of preparation
The interim results for the half year ended 31 January 2010 have been prepared
on the basis of the accounting policies expected to be used in the 2010
Lok'nStore Group Plc Annual Report and Accounts and in accordance with the
recognition and measurement principles of International Financial Reporting
Standards as adopted by the European Union ('EU') ('IFRS').
The same accounting policies, presentation and methods of computation are
followed in these interim condensed set of financial statements as have been
applied in the Group's latest annual audited financial statements, except for
changes in presentation in respect of the comprehensive revision to IAS1
"Presentation of Financial Statements" and a change in accounting policy in
respect of IAS 23 "Borrowing Costs". The Group's revised finance costs
accounting policy is as follows:
All borrowing costs are recognised in the Income Statement in the period in
which they are incurred, unless the costs are incurred as part of the
development of a qualifying asset, when they will be capitalised. A qualifying
asset is an asset that necessarily takes a substantial period of time to get
ready for its intended use. Commencement of capitalisation is the date when the
group incurs expenditure for the qualifying asset, incurs borrowing costs and
undertakes activities that are necessary to prepare the assets for their
intended use. In the case of suspension of activities during extended periods,
the group suspends capitalisation. The Group ceases capitalisation of borrowing
costs when substantially all of the activities necessary to prepare the asset
for use are complete.
The Group's date of adoption was 1 August 2009, (the first annual period
commencing after the IAS 23 effective date of 1 January 2009). All of the Groups
current qualifying assets predate the date of adoption and accordingly, under
the transitional adoption arrangements, no borrowing costs have been capitalised
against them in the period and no prior year restatement has been made as a
result of this change in accounting policy.
In accordance with the requirements of IFRS8, the Group has reviewed its
identifiable business segments and the information used and provided internally
to the Board in order to make decisions about resource allocation and
performance management. It considers that it operates as one unified business,
and is engaged in one principal activity based entirely within the United
Kingdom. Accordingly this has not required any modification to the presentation
of the segmental information as disclosed under note 3.
The interim results, which were approved by the Directors on 23 April 2010, are
unaudited. The interim results do not constitute statutory financial statements
within the meaning of section 434 of the Companies Act 2006.
Comparative figures for the year ended 31 July 2009 have been extracted from the
statutory accounts for the Group for that period, which carried an unqualified
audit report, did not include a reference to any matters to which the auditor
drew attention by way of emphasis of matter, did not contain a statement under
section 498(2) or (3) of the Companies Act 2006 and have been delivered to the
Registrar of Companies.
Critical accounting estimates and judgements
The preparation of consolidated financial statements under IFRS requires
management to make estimates and assumptions that may affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses. Actual outcomes may differ from these estimates and assumptions.
The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
a) Estimate of fair value of trading properties
The Group values its self-storage stores using a discounted cash flow
methodology which is based on projections of net operating income. Principal
assumptions underlying management's estimation of the fair value are those
relating to stabilised occupancy levels; expected future growth in storage rents
and operating costs, maintenance requirements, capitalisation rates and discount
rates. A more detailed explanation of the background and methodology adopted in
the valuation of the Group's trading properties is set out in the annual
financial statements. The carrying value of properties held at valuation at the
balance sheet date was GBP57.6 million (31.07.09: GBP57.6 million: 31.01.09:
GBP55.4 million).
Market Uncertainty
UK property values experienced sharp falls in value and liquidity since mid
2007, with fewer transactions being completed. As a consequence, there has been
a significant reduction in market evidence for Cushman & Wakefield LLP (C&W) to
base their valuation on.
C&W report that in relation to the self-storage sector specifically, there were
a number of transactions in 2007 but there have been no significant transactions
in 2008 or in 2009 other than the sale of a 51% stake in Shurgard Europe which
was announced in January 2008 and completed on 31 March 2008. Due to the absence
of comparable market information C&W have therefore had to exercise more than
the usual degree of judgement in arriving at their opinion of value.
In order to provide a rational opinion of value at the present time it is
necessary to assume that the property market will continue to trade in an
orderly fashion. In this regard C&W have assumed that the self-storage sector
will continue to perform in a way not greatly different from that being
anticipated prior to the 'credit crunch', however they have reflected negative
sentiment in their capitalisation rates and have reflected current trading
conditions in their cash flow projections for the properties.
C&W confirm that because they are having to exercise a greater degree of
judgement than is usual in a more active market, there is greater uncertainty
attached to their opinion of value than during more normal market conditions.
Although the Board did not commission an external valuation at this interim it
is mindful of the need to accord with the measurement principles of
International Financial Reporting Standards as adopted by the European Union.
Accordingly the property valuations at the half-year are directors' valuations.
After consultation with our external valuers, the Directors considered that
there had been a negligible movement in market yields since the July year-end
and therefore no market yield shift assumption has been applied at 31 January
2010 to our properties externally valued at 31 July 2009. The Directors
therefore consider that it is appropriate to maintain the portfolio valuation
without modification. Also no yield shift has been applied to the Reading site
valued for its residential development potential as this value was substantially
reduced at 31 July 2008, to a value which remains appropriate at 31 January
2010.
As a result, on a same store basis Lok'nStore's freehold and operating leasehold
properties which were independently valued by Cushman & Wakefield ('C&W') at
GBP67.6 million as at 31 July 2009 have been maintained at 31 January 2010 at
GBP67.6 million. Together with our stores under development at cost including
our Maidenhead site (included in non-current property lease premiums), our total
property is stated at GBP78.4 million (31 July 2009: GBP78.4 million).
b) Assets in the course of construction and land held for pipeline store
development ('Development property assets')
The Group's development property assets are held in the balance sheet at
historic cost and are not valued externally. In acquiring sites for
redevelopment into self-storage facilities, the Group estimates and makes
judgments on the potential net lettable storage space that it can achieve in its
planning negotiations, together with the time it will take to achieve maturity
occupancy level. In addition, assumptions are made on the storage rent that can
be achieved at the store by comparing with other stores within the portfolio and
within the local area. These judgements taken together with estimates of
operating costs and the projected construction cost, allow the Group to
calculate the potential net operating income at maturity, projected returns on
capital invested and hence to support the purchase price of the site at
acquisition. Following the acquisition, regular reviews are carried out taking
into account the status of the planning negotiations, revised construction costs
or capacity of the new facility, for example, to make an assessment of any
impairment to the carrying value of the development property held at historic
cost. The Group reviews all development property assets for impairment at each
balance sheet date in the light of the results of these reviews. Once a store is
opened, then it is valued as a trading store. The carrying value of development
property assets at the balance sheet date was GBP10.8 million (31.01.09: GBP10.8
million) of which GBP2.8 million relating to the long lease at Maidenhead was
classified as a property lease premium in the balance sheet (31.01.09: GBP2.8
million).
c) Dilapidations
The Group has a number of stores operating under leasehold tenure. From time to
time, in accordance with the Group's stated objective to maximise shareholder
value, it may choose not to renew a lease, particularly where alternative
premises have been sourced and customers can be moved into the new premises. In
these circumstances the Group may incur repairing and decoration liabilities
('dilapidations') based on the tenant's obligation to the landlord to keep the
leasehold premises in good repair and decorative condition. Landlords in these
circumstances will normally serve a schedule of dilapidations on the tenant
setting out a list of items to be remedied. This may also refer to obligations
on the tenant to reinstate any alterations works previously undertaken by the
tenant under a Licence for Alterations. Such claims will always be negotiated
robustly by Lok'nStore and may require legal, valuation and surveyor's
expertise, particularly if it can be shown that the landlord's interest in the
premises has not been diminished by the dilapidations. As such, evaluations of
actual liabilities are always a critical judgment and any sums provided to be
set aside can only be an estimate until a settlement is concluded.
The carrying value of the provision for dilapidations at the balance sheet date
was GBPNil (31.01.09: GBP37,260).
3 Revenue and segmental information
Revenue represents amounts derived from the provision of self-storage
accommodation and related services to customers outside the Group which fall
within the Group's ordinary activities after deduction of trade discounts and
value added tax. The Group's net assets, revenue and profit before tax are
attributable to one principal activity, the provision of self-storage
accommodation and related services. These all arise in the United Kingdom.
+---------------------------------+-------------+-------------+------------+
| | Six | Six | Year |
| | months | months | ended |
| | ended | ended | 31 July |
| | 31 | 31 | 2009 |
| | January | January | (audited) |
| | 2010 | 2009 | GBP |
| | (unaudited) | (unaudited) | |
| | GBP | GBP | |
+---------------------------------+-------------+-------------+------------+
| Stores trading | | | |
+---------------------------------+-------------+-------------+------------+
| Self-storage income | 4,593,016 | 4,577,142 | 8,879,536 |
+---------------------------------+-------------+-------------+------------+
| Other storage related income | 521,739 | 418,846 | 927,498 |
+---------------------------------+-------------+-------------+------------+
| Ancillary store rental income | 2,609 | 2,609 | 5,218 |
+---------------------------------+-------------+-------------+------------+
| Management fees | 11,116 | 10,455 | 20,795 |
+---------------------------------+-------------+-------------+------------+
| Sub-Total | 5,128,480 | 5,009,052 | 9,833,046 |
+---------------------------------+-------------+-------------+------------+
| Stores under development | | | |
+---------------------------------+-------------+-------------+------------+
| Non-storage income | 58,754 | 84,966 | 175,632 |
+---------------------------------+-------------+-------------+------------+
| Total revenue | 5,187,234 | 5,094,018 | 10,008,678 |
+---------------------------------+-------------+-------------+------------+
4 Cost of sales
Cost of sales represents the direct costs associated with the sale of retail
products (boxes, packaging etc), the ancillary sales of insurance cover for
customer goods and the provision of van hire services at discounted rates to
customers to facilitate 'move-ins', all of which fall within the Group's
ordinary activities.
+---------------------------------+-----------+-----------+-----------+
| | Unaudited | Unaudited | Audited |
| | | | Year |
| | Six | Six | Ended |
| | months | months | 31 July |
| | Ended | Ended | 2009 |
| | 31 | 31 | GBP |
| | January | January | |
| | 2009 | 2008 | |
| | GBP | GBP | |
+---------------------------------+-----------+-----------+-----------+
| Retail | 76,580 | 92,027 | 181,725 |
+---------------------------------+-----------+-----------+-----------+
| Insurance | 10,247 | 17,942 | 31,080 |
+---------------------------------+-----------+-----------+-----------+
| Van Hire | 28,636 | 41,299 | 69,859 |
+---------------------------------+-----------+-----------+-----------+
| | 115,463 | 151,268 | 282,664 |
+---------------------------------+-----------+-----------+-----------+
5 Taxation
+---------------------------------+-----------+-----------+-----------+
| | Unaudited | Unaudited | Audited |
| | Six | Six | Year |
| | months | months | Ended |
| | Ended | Ended | 31 July |
| | 31 | 31 | 2009 |
| | January | January | GBP |
| | 2010 | 2009 | |
| | GBP | GBP | |
+---------------------------------+-----------+-----------+-----------+
| Deferred tax charge / (credit) | 129,469 | - | (58,092 |
| for the period | | | |
+---------------------------------+-----------+-----------+-----------+
| Total tax charge/(credit) for | 129,469 | - | (58,092) |
| the period | | | |
+---------------------------------+-----------+-----------+-----------+
No current tax charge arises due to the availability of excess tax losses
brought forward.
6 Earnings/ (loss) per ordinary share
The calculation of earnings per ordinary share is based on the following profit
and on the following weighted average number of shares in issue.
+---------------------------------+------------+------------+------------+
| | Unaudited | Unaudited | Audited |
| | Six | Six | Year |
| | months | months | Ended |
| | Ended | Ended | 31 July |
| | 31 | 31 | 2009 |
| | January | January | GBP |
| | 2010 | 2009 | |
| | GBP | GBP | |
+---------------------------------+------------+------------+------------+
| Profit/ (loss) for the | 61,157 | (480,162) | (597,959) |
| financial period | | | |
+---------------------------------+------------+------------+------------+
| | | | |
+---------------------------------+------------+------------+------------+
| | No of | No of | No of |
| | shares | shares | shares |
+---------------------------------+------------+------------+------------+
| Weighted average number of | | | |
| shares | | | |
+---------------------------------+------------+------------+------------+
| For basic earnings per share | 24,993,653 | 24,991,918 | 24,993,653 |
+---------------------------------+------------+------------+------------+
| Dilutive effect of share | 45,882 | - | - |
| options | | | |
+---------------------------------+------------+------------+------------+
| | 25,039,535 | 24,991,918 | 24,993,653 |
+---------------------------------+------------+------------+------------+
| Earnings/(Loss) per share | | | |
+---------------------------------+------------+------------+------------+
| Basic | 0.24p | (1.92p) | (2.39p) |
+---------------------------------+------------+------------+------------+
| Diluted | 0.24p | (1.92p) | (2.39p) |
+---------------------------------+------------+------------+------------+
623,212 shares held in the Employee Benefit Trust and 1,142,000 treasury shares
are excluded from the above.
7 Dividends
+----------------------------------+-----------+-----------+-----------+
| | Unaudited | Unaudited | Audited |
| | Six | Six | Year |
| | months | months | Ended |
| | Ended | ended | 31 July |
| | 31 | 31 | 2009 |
| | January | January | GBP |
| | 2010 | 2009 | |
| | GBP | GBP | |
+----------------------------------+-----------+-----------+-----------+
| Amounts recognised as | | | |
| distributions to equity holders | | | |
| in the period: | | | |
+----------------------------------+-----------+-----------+-----------+
| Final dividend for year ended 31 | - | 167,446 | 167,446 |
| July 2008 (0.67 pence per share) | | | |
+----------------------------------+-----------+-----------+-----------+
| Final dividend for year ended 31 | 249,937 | - | - |
| July 2009 (1.00 pence per share) | | | |
+----------------------------------+-----------+-----------+-----------+
| | 249,937 | 167,446 | 167,446 |
+----------------------------------+-----------+-----------+-----------+
8a Property, plant and equipment
+-----------------------+------------+--------------+------------+----------+------------+
| | Land | Short | Fixtures, | Motor | Total |
| | and | Leasehold | Fittings | Vehicles | GBP |
| | Buildings | improvements | and | at cost | |
| | GBP | GBP | equipment | GBP | |
| | | | at cost | | |
| | | | GBP | | |
+-----------------------+------------+--------------+------------+----------+------------+
| Group | | | | | |
+-----------------------+------------+--------------+------------+----------+------------+
| Net book value at 31 | 66,956,311 | 1,537,252 | 9,727,404 | 117,811 | 78,338,778 |
| July 2008 | | | | | |
+-----------------------+------------+--------------+------------+----------+------------+
| Net book value at 31 | 57,344,015 | 1,455,930 | 10,256,389 | 134,407 | 69,190,741 |
| January 2009 | | | | | |
+-----------------------+------------+--------------+------------+----------+------------+
| Net book value at 31 | 59,899,798 | 1,335,780 | 9,684,181 | 121,070 | 71,040,829 |
| July 2009 | | | | | |
+-----------------------+------------+--------------+------------+----------+------------+
| Cost or valuation | | | | | |
+-----------------------+------------+--------------+------------+----------+------------+
| 1 August 2009 | 59,899,798 | 2,492,338 | 15,331,550 | 161,974 | 77,885,660 |
+-----------------------+------------+--------------+------------+----------+------------+
| Additions | 79,537 | 12,225 | 129,048 | 550 | 221,360 |
+-----------------------+------------+--------------+------------+----------+------------+
| Disposals | - | - | - | (5,000) | (5,000) |
+-----------------------+------------+--------------+------------+----------+------------+
| Revaluations | 123,615 | - | - | - | 123,615 |
+-----------------------+------------+--------------+------------+----------+------------+
| 31 January 2010 | 60,102,950 | 2,504,563 | 15,460,598 | 157,524 | 78,225,635 |
+-----------------------+------------+--------------+------------+----------+------------+
| Depreciation | | | | | |
+-----------------------+------------+--------------+------------+----------+------------+
| 1 August 2009 | - | 1,156,558 | 5,647,369 | 40,904 | 6,844,831 |
+-----------------------+------------+--------------+------------+----------+------------+
| Depreciation | 252,113 | 98,171 | 555,448 | 14,162 | 919,894 |
+-----------------------+------------+--------------+------------+----------+------------+
| Disposals | - | - | - | (1,648) | (1,648) |
+-----------------------+------------+--------------+------------+----------+------------+
| Revaluations | (252,113) | - | - | - | (252,113) |
+-----------------------+------------+--------------+------------+----------+------------+
| 31 January 2010 | - | 1,254,729 | 6,202,817 | 53,418 | 7,510,964 |
+-----------------------+------------+--------------+------------+----------+------------+
| Net book value at 31 | 60,102,950 | 1,249,834 | 9,257,781 | 104,106 | 70,714,671 |
| January 2010 | | | | | |
+-----------------------+------------+--------------+------------+----------+------------+
The capital expenditure during the period was GBP0.22 million, which relates to
minor works at some stores and planning and preparatory expenditures at the
Reading, Portsmouth North Harbour, Southampton and Maidenhead development sites.
Market valuation of freehold and leasehold land and buildings
Following the Company's comprehensive external valuation at 31 July 2009 by C&W
which indicated a total for freehold properties valued of GBP57.6 million (NBV
GBP29.8 million), the freehold and leasehold properties have not been externally
valued at 31 January 2010, although in accordance with the Company's established
policy it is the intention to do so at the next year end at 31 July 2010.
Although the Board did not commission an external valuation at this interim it
is mindful of the need to accord with the measurement principles of
International Financial Reporting Standards as adopted by the European Union.
Accordingly after consultation with our external valuers, the Directors
considered that there had been a negligible movement in market yields and
therefore no market yield shift assumption has been applied at 31 January 2010
to our properties externally valued at 31 July 2009. The Directors therefore
consider that it is appropriate to maintain the portfolio valuation without
modification. Also no yield shift has been applied to the Reading site valued
for its residential development potential as this value was substantially
reduced at 31 July 2008, to a value which remains appropriate at 31 January
2010.
As a result, on a same store basis, Lok'nStore's freehold and operating
leasehold properties which were independently valued by Cushman & Wakefield
('C&W') at GBP67.6 million as at 31 July 2009 have been maintained at 31 January
2010 at GBP67.6 million. Together with our stores under development at cost and
our Maidenhead site (included in non-current property lease premiums), our total
property is stated at GBP78.4 million (31 July 2009: GBP78.4 million).
Land and buildings are carried at valuation in the balance sheet. Short
leasehold properties held under operating leases are carried at cost rather than
valuation in accordance with IFRS. Significant progress has been made in
enhancing the value of development sites which are held at cost of GBP10.8
million, through a combination of planning permissions secured and the potential
for more imaginative collaborative schemes on certain of our development land
sites.
Market Uncertainty
The Directors consider, based on opinion available that the market for
self-storage assets has remained relatively resilient to the downturn in
property values generally and increasing yields seen in the wider property
market. The market conditions generally and the lack of transactions,
particularly since the full extent of the banking and wider credit crisis
manifested itself, only serve to increase the degree of uncertainty that must
attach to any opinion of value given at the present time. (Refer also to note 2a
on critical accounting estimates and judgements in relation to fair value of
trading properties).
8b Property lease premiums
The carrying value of development property assets at the balance sheet date was
GBP10.8 million (31.01.09: GBP10.8 million) of which GBP2.8 million relating to
the long lease at Maidenhead is classified as other non-current asset in the
balance sheet (31.01.09: GBP2.8 million). This represents a lease premium paid
on entering the lease and other related costs. The lease runs until 31 March
2076. A peppercorn rent is payable until 2027 and a market rent thereafter.
9 Trade and other receivables
+-----------------------------------+-----------+-----------+-----------+
| | Unaudited | Unaudited | Audited |
| | Six | Six | Year |
| | months | months | Ended |
| | Ended | Ended | 31 July |
| | 31 | 31 | 2009 |
| | January | January | GBP |
| | 2010 | 2009 | |
| | GBP | GBP | |
+-----------------------------------+-----------+-----------+-----------+
| Due within one year: | | | |
+-----------------------------------+-----------+-----------+-----------+
| Trade receivables | 835,667 | 705,737 | 684,630 |
+-----------------------------------+-----------+-----------+-----------+
| Other receivables | 76,594 | 119,457 | 78,073 |
+-----------------------------------+-----------+-----------+-----------+
| Prepayments and accrued income | 501,116 | 598,048 | 438,193 |
+-----------------------------------+-----------+-----------+-----------+
| | 1,413,377 | 1,423,242 | 1,200,896 |
+-----------------------------------+-----------+-----------+-----------+
10 Trade and other payables
+-----------------------------------+-----------+-----------+-----------+
| | Unaudited | Unaudited | Audited |
| | Six | Six | Year |
| | months | months | Ended |
| | ended | Ended | 31 July |
| | 31 | 31 | 2009 |
| | January | January | GBP |
| | 2010 | 2009 | |
| | GBP | GBP | |
+-----------------------------------+-----------+-----------+-----------+
| Trade payables | 486,725 | 381,365 | 460,917 |
+-----------------------------------+-----------+-----------+-----------+
| Taxation and social security | 315,172 | 182,723 | 245,449 |
| costs | | | |
+-----------------------------------+-----------+-----------+-----------+
| Other payables | 896,846 | 804,484 | 932,319 |
+-----------------------------------+-----------+-----------+-----------+
| Accruals and deferred income | 1,570,078 | 1,553,775 | 502,904 |
+-----------------------------------+-----------+-----------+-----------+
| | 3,268,821 | 2,922,347 | 3,141,589 |
+-----------------------------------+-----------+-----------+-----------+
11 Bank borrowings
+-----------------------------------+------------+------------+------------+
| | Unaudited | Unaudited | Audited |
| | Six | Six | Year |
| | months | months | Ended |
| | Ended | Ended | 31 July |
| | 31 | 31 | 2009 |
| | January | January | GBP |
| | 2010 | 2009 | |
| | GBP | GBP | |
+-----------------------------------+------------+------------+------------+
| Bank loans repayable in more than | | | |
| two years but not more than five | | | |
| years | | | |
+-----------------------------------+------------+------------+------------+
| Gross | 28,089,416 | 27,642,416 | 28,089,416 |
+-----------------------------------+------------+------------+------------+
| Deferred financing costs | (70,041) | (105,061) | (87,551) |
+-----------------------------------+------------+------------+------------+
| Net bank loans repayable in more | 28,019,375 | 27,537,355 | 28,001,865 |
| than two years but not more than | | | |
| five years | | | |
+-----------------------------------+------------+------------+------------+
The bank loans are secured by legal charges and debentures over the freehold and
leasehold properties and other assets of the business with a net book value of
GBP80.6 million together with cross-company guarantees of Lok'nStore Limited.
The revolving credit facility is for a five-year term and expires on 5 February
2012. The Group is not obliged to make any repayments prior to expiration. The
loans bear interest at the London Inter Bank Offer Rate (LIBOR) plus 1.25%-1.35%
Royal Bank of Scotland plc margin.
The gearing ratio at the period-end is as follows:
+-----------------------------------+--------------+--------------+--------------+
| | Unaudited | Unaudited | Audited |
| | 31 | 31 | 31 July |
| | January | January | 2009 |
| | 2010 | 2009 | GBP |
| | GBP | GBP | |
+-----------------------------------+--------------+--------------+--------------+
| Debt | (28,089,416) | (27,642,416) | (28,089,416) |
+-----------------------------------+--------------+--------------+--------------+
| Cash and cash equivalents | 3,880,989 | 2,141,786 | 3,228,731 |
+-----------------------------------+--------------+--------------+--------------+
| Net debt | (24,208,427) | (25,500,630) | (24,860,685) |
+-----------------------------------+--------------+--------------+--------------+
| Balance sheet equity | 37,150,489 | 35,511,786 | 36,972,008 |
+-----------------------------------+--------------+--------------+--------------+
| Net debt to equity | 65.2% | 71.8% | 67.2% |
+-----------------------------------+--------------+--------------+--------------+
12 Deferred tax
+-----------------------------------+------------+-------------+-------------+
| | Unaudited | Unaudited | Audited |
| | 31 | 31 | 31 July |
| | January | January | 2009 |
| | 2010 | 2009 | GBP |
| | GBP | GBP | |
+-----------------------------------+------------+-------------+-------------+
| Provision at start of period | 10,248,297 | 12,431,474 | 12,431,474 |
+-----------------------------------+------------+-------------+-------------+
| Charge/(credit) to income in the | 129,469 | - | (58,092) |
| period | | | |
+-----------------------------------+------------+-------------+-------------+
| Charge/ (credit) to equity in | 104,430 | (2,787,929) | (2,125,085) |
| period | | | |
+-----------------------------------+------------+-------------+-------------+
| Provision at end of period | 10,482,196 | 9,643,545 | 10,248,297 |
+-----------------------------------+------------+-------------+-------------+
The deferred tax liability arises predominantly on the revaluation of the
properties and on the rolled over gain arising from the disposal of the Kingston
and Woking sites. In due course the site of the existing Reading store is likely
to be sold with the benefit of its permission for residential development and
the proceeds will be reinvested in our new store pipeline. It is not the
intention of the directors to make any other significant disposals of
operational self-storage centres in the foreseeable future. At present, it is
not envisaged that any tax will become payable in the foreseeable future due to
the trading losses brought forward and the availability of rollover relief.
13 Equity settled share-based payment plans
The Group operates three equity settled share-based payment plans, an Enterprise
Management Initiative ('EMI') approved and an unapproved share option scheme,
the rules of which are similar in all material respects. The grant of options to
executive directors and senior management is recommended by the Remuneration
Committee on the basis of their contribution to the Group's success. The options
vest after three years.
The Company has the following share options:
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Summary | As | Granted | Exercised | Lapsed/ | As at |
| | at | | | surrendered | 31 |
| | 31 | | | | January |
| | July | | | | 2010 |
| | 2009 | | | | |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Enterprise Management | 491,901 | - | - | - | 491,901 |
| Initiative Scheme | | | | | |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Approved Share Options | 19,458 | - | - | (13,621) | 5,837 |
| Scheme | | | | | |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Unapproved Share Options | 2,086,906 | - | - | (10,000) | 2,076,906 |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Total | 2,598,265 | - | - | (23,261) | 2,574,644 |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Options held by Directors | 1,490,000 | - | - | (10,000) | 1,480,000 |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Options not held by | 1,108,265 | - | - | (13,621) | 1,094,644 |
| Directors | | | | | |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Total | 2,598,265 | - | - | (23,621) | 2,574,644 |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Summary | As | Granted | Exercised | Lapsed/ | As at |
| | at | | | surrendered | 31 |
| | 31 | | | | January |
| | July | | | | 2009 |
| | 2009 | | | | |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Enterprise Management | 491,901 | - | - | - | 491,901 |
| Initiative Scheme | | | | | |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Approved Share Options | 19,458 | - | - | - | 19,458 |
| Scheme | | | | | |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Unapproved Share Options | 1,743,906 | 343,000 | - | - | 2,086,906 |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Total | 2,255,265 | 343,000 | - | - | 2,598,265 |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Options held by Directors | 1,270,000 | 220,000 | - | - | 1,490,000 |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Options not held by | 985,265 | 123,000 | - | - | 1,108,265 |
| Directors | | | | | |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
| Total | 2,255,265 | 343,000 | - | - | 2,598,265 |
+-----------------------------+-----------+---------+-----------+-------------+-----------+
The exercise price of the options is equal to the closing mid-market price of
the shares on the trading day previous to the date of the grant. The exercise of
options awarded has been subject to the meeting of performance criteria geared
primarily to sales growth with the key non-market performance condition being
the achievement of GBP10 million annual turnover. Exercise of an option is
subject to continued employment. The life of each option granted is seven years.
There are no cash settlement alternatives.
The expected volatility is based on a historical review of share price movements
over a period of time, prior to the date of grant, commensurate with the
expected term of each award. The expected term is assumed to be six years which
is part way between vesting (three years after grant) and lapse (10 years after
grant). The risk free rate of return is the UK gilt rate at date of grant
commensurate with the expected term (i.e. six years).
The total charge for the period relating to employer share-based payment schemes
was GBP95,964 (31.01.09: GBP145,306), all of which relates to equity-settled
share-based payment transactions.
14 Other reserves
+--------------------------+-----------+---------------+------------+-------------+------------+
| Group | Merger | Other | Capital | Share-based | Total |
| | reserve | Distributable | Redemption | Payment | GBP |
| | GBP | reserve | reserve | reserve | |
| | | GBP | GBP | GBP | |
+--------------------------+-----------+---------------+------------+-------------+------------+
| 1 August 2008 | 6,295,295 | 5,903,002 | 34,205 | 804,619 | 13,037,121 |
+--------------------------+-----------+---------------+------------+-------------+------------+
| Share-based remuneration | - | - | - | 145,306 | 145,306 |
| (options) | | | | | |
+--------------------------+-----------+---------------+------------+-------------+------------+
| 31 January 2009 | 6,295,295 | 5,903,002 | 34,205 | 949,925 | 13,182,427 |
+--------------------------+-----------+---------------+------------+-------------+------------+
| Share-based remuneration | - | - | - | 144,558 | 144,558 |
| (options) | | | | | |
+--------------------------+-----------+---------------+------------+-------------+------------+
| Dividend paid | - | (167,446) | - | - | (167,446) |
| | | | | | |
+--------------------------+-----------+---------------+------------+-------------+------------+
| 31 July 2009 | 6,295,295 | 5,735,556 | 34,205 | 1,094,483 | 13,159,539 |
+--------------------------+-----------+---------------+------------+-------------+------------+
| Share-based remuneration | - | - | - | 95,964 | 95,964 |
| (options) | | | | | |
+--------------------------+-----------+---------------+------------+-------------+------------+
| Dividend paid | - | (249,937) | - | - | (249,937) |
+--------------------------+-----------+---------------+------------+-------------+------------+
| 31 January 2010 | 6,295,295 | 5,485,619 | 34,205 | 1,190,447 | 13,005,566 |
+--------------------------+-----------+---------------+------------+-------------+------------+
The merger reserve represents the excess of the nominal value of the shares
issued by Lok'nStore Group Plc over the nominal value of the share capital and
share premium of Lok'nStore Limited as at 31 July 2001.
The other distributable reserve and the capital redemption reserve arose in the
year ended 31 July 2004 from the purchase of the Company's own shares and a
cancellation of share premium.
15 Retained earnings
+-------------------------------------+-------------+-------------+-----------+
| Group | Retained | Own | Retained |
| | earnings | shares | Earnings |
| | before | (note | Total |
| | deduction | 16) | GBP |
| | of | GBP | |
| | own shares | | |
| | GBP | | |
+-------------------------------------+-------------+-------------+-----------+
| 1 August 2008 | 5,884,438 | (2,594,200) | 3,290,238 |
+-------------------------------------+-------------+-------------+-----------+
| Loss for the financial period | (480,162) | - | (480,162) |
+-------------------------------------+-------------+-------------+-----------+
| Transfer from revaluation reserve | 141,787 | - | 141,787 |
+-------------------------------------+-------------+-------------+-----------+
| Dividends | - | - | - |
+-------------------------------------+-------------+-------------+-----------+
| 31 January 2009 | 5,546,063 | (2,594,200) | 2,951,863 |
+-------------------------------------+-------------+-------------+-----------+
| Loss for the financial period | (117,797) | - | (117,797) |
+-------------------------------------+-------------+-------------+-----------+
| Transfer from revaluation reserve | 253,068 | - | 253,068 |
+-------------------------------------+-------------+-------------+-----------+
| Transfer to employee leavers | - | 1,388 | 1,388 |
+-------------------------------------+-------------+-------------+-----------+
| 1 August 2009 | 5,681,334 | (2,592,812) | 3,088,522 |
+-------------------------------------+-------------+-------------+-----------+
| Profit for the financial period | 61,157 | - | 61,157 |
+-------------------------------------+-------------+-------------+-----------+
| Transfer from revaluation reserve | 100,348 | - | 100,348 |
+-------------------------------------+-------------+-------------+-----------+
| 31 January 2010 | 5,842,839 | (2,592,812) | 3,250,027 |
+-------------------------------------+-------------+-------------+-----------+
The Own Shares Reserve represents the cost of shares in Lok'nStore Group Plc
purchased in the market and held in the Employee Benefit Trust to satisfy awards
made under the Groups share incentive plan and shares purchased separately by
Lok'nStore Limited for Treasury Account. These treasury shares have not been
cancelled and were purchased at an average price considerably lower than the
Company's adjusted net asset value. These shares may in due course be released
back into the market to assist liquidity of the Company's stock and to provide
availability of a reasonable line of stock to satisfy investor demand as and
when required.
The Company has taken advantage of the exemption available under the Companies
Act 2006 not to present the Company income statement. The Company profit for the
year was GBPnil (2009: GBPnil).
16 Own Shares
+--------------------------+---------+---------+-----------+-----------+-----------+
| | ESOP | ESOP | Treasury | Treasury | Own |
| | shares | shares | shares | shares | shares |
| | Number | GBP | Number | GBP | total |
| | | | | | GBP |
+--------------------------+---------+---------+-----------+-----------+-----------+
| 31 July 2008 | 624,947 | 501,298 | 1,142,000 | 2,092,902 | 2,594,200 |
+--------------------------+---------+---------+-----------+-----------+-----------+
| 31 January 2009 | 624,947 | 501,298 | 1,142,000 | 2,092,902 | 2,594,200 |
+--------------------------+---------+---------+-----------+-----------+-----------+
| Transfer out of scheme | (1,735) | (1,388) | - | - | (1,388) |
+--------------------------+---------+---------+-----------+-----------+-----------+
| 31 July 2009 and 31 | 623,212 | 499,910 | 1,142,000 | 2,092,902 | 2,592,812 |
| January 2010 | | | | | |
+--------------------------+---------+---------+-----------+-----------+-----------+
| | | | | | |
+--------------------------+---------+---------+-----------+-----------+-----------+
Lok'nStore Limited holds a total of 1,142,000 of its own ordinary shares of 1
pence each for treasury with an aggregate nominal value of GBP11,420 for an
aggregate cost of GBP2,092,902 at an average price of GBP1.818 per share. These
shares represent 4.27% of the Company's called-up share capital. The maximum
number of shares held by the Company in the period was 1,142,000. No shares were
disposed of or cancelled in the period.
Distributable reserves have been reduced by GBP2,092,902 for the purchase cost
of these shares.
The Group operates an Employee Benefit Trust ('EBT') under a settlement dated 8
July 1999 between Lok'nStore Limited and Lok'nStore Trustee Limited,
constituting an employees' share scheme.
Funds are placed in the trust by way of deduction from employees' salaries on a
monthly basis as they so instruct for purchase of shares in the Company. Shares
are allocated to employees at the prevailing market price when the salary
deductions are made.
As at 31 January 2010, the Trust held 623,212 (Jan 2009: 624,947) Ordinary
Shares of 1 pence each with a market value of GBP584,427 (31.01.09: GBP218,731).
No dividends were waived during the year. No options have been granted under the
EBT.
17 Cash flows
(a) Reconciliation of profit/(loss) to net cash flows from operating activities
+-------------------------------------+-------------+-------------+-------------+
| | Unaudited | Unaudited | Audited |
| | Six months | Six | Year |
| | ended | months | Ended |
| | 31 January | ended | 31 July |
| | 2010 | 31 | 2009 |
| | GBP | January | GBP |
| | | 2009 | |
| | | GBP | |
+-------------------------------------+-------------+-------------+-------------+
| Profit/ (loss) before tax | 190,626 | (480,162) | (656,051) |
+-------------------------------------+-------------+-------------+-------------+
| Depreciation | 919,894 | 877,107 | 1,839,458 |
+-------------------------------------+-------------+-------------+-------------+
| Share-based employee remuneration | 95,964 | 145,306 | 289,864 |
+-------------------------------------+-------------+-------------+-------------+
| Loss on disposal of fixed assets | 452 | 7,322 | 7,322 |
+-------------------------------------+-------------+-------------+-------------+
| Interest receivable | (6,384) | (48,824) | (64,326) |
+-------------------------------------+-------------+-------------+-------------+
| Interest payable | 253,364 | 769,211 | 1,055,283 |
+-------------------------------------+-------------+-------------+-------------+
| (Increase)/decrease in inventories | (2,986) | (6,552) | 25,607 |
+-------------------------------------+-------------+-------------+-------------+
| Decrease/ (increase) in receivables | 568,030 | 785,238 | 1,095,138 |
+-------------------------------------+-------------+-------------+-------------+
| (Decrease) in payables | (709,669) | (2,040,759) | (1,778,563) |
+-------------------------------------+-------------+-------------+-------------+
| Decrease in provisions | - | - | (84,664) |
+-------------------------------------+-------------+-------------+-------------+
| Net cash flow from operating | 1,309,291 | 7,887 | 1,729,068 |
| activities | | | |
+-------------------------------------+-------------+-------------+-------------+
(b) Reconciliation of Net Cash Flow to Movement in Net Debt
+------------------------------------+--------------+--------------+--------------+
| | Unaudited | Unaudited | Audited |
| | Six months | Six | Year |
| | ended | months | ended |
| | 31 January | ended | 31 July |
| | 2010 | 31 | 2009 |
| | GBP | January | GBP |
| | | 2009 | |
| | | GBP | |
+------------------------------------+--------------+--------------+--------------+
| Increase/ (decrease) in cash in | 652,258 | (339,040) | 747,905 |
| the period | | | |
+------------------------------------+--------------+--------------+--------------+
| Change in net debt resulting from | - | (2,208,619) | (2,655,619) |
| cash flows | | | |
+------------------------------------+--------------+--------------+--------------+
| Movement in net debt in period | 652,258 | (2,547,659) | (1,907,714) |
+------------------------------------+--------------+--------------+--------------+
| Net debt brought forward | (24,860,685) | (22,952,971) | (22,952,971) |
+------------------------------------+--------------+--------------+--------------+
| Net debt carried forward | (24,208,427) | (25,500,630) | (24,860,685) |
+------------------------------------+--------------+--------------+--------------+
18 Commitments under operating leases
At 31 January 2010, the total future minimum lease payments under
non-cancellable operating leases were as follows:
The Group as a lessee:
The minimum lease payments under non-cancellable operating lease rentals are in
aggregate as follows:
+------------------------------------+-------------+------------+------------+
| | Unaudited | Unaudited | Audited |
| | Six months | Six | Year |
| | ended3 | months | ended |
| | 1 January | ended | 31 July |
| | 2010 | 31 | 2009 |
| | GBP | January | GBP |
| | | 2009 | |
| | | GBP | |
+------------------------------------+-------------+------------+------------+
| Land and buildings | | | |
+------------------------------------+-------------+------------+------------+
| Amounts due: | | | |
+------------------------------------+-------------+------------+------------+
| Within one year | 1,454,692 | 1,389,692 | 1,399,692 |
+------------------------------------+-------------+------------+------------+
| Between two and five years | 5,818,768 | 5,338,768 | 5,378,768 |
+------------------------------------+-------------+------------+------------+
| After five years | 6,169,480 | 6,309,142 | 5,886,795 |
+------------------------------------+-------------+------------+------------+
| | 13,442,940 | 13,037,602 | 12,665,255 |
+------------------------------------+-------------+------------+------------+
Operating lease payments represent rentals payable by the Group for certain of
its properties.
Typically leases are negotiated for a term of 20 years and rentals are fixed for
an average of five years.
19 Events after the reporting period
There were no reportable events after the balance sheet date.
20 Related party transactions
The following balances existed between the Company and its subsidiaries at 31
January.
+------------------------------------+-------------+-----------+-----------+
| | January | January | July |
| | 2010 | 2009 | 2009 |
| | GBP | GBP | GBP |
+------------------------------------+-------------+-----------+-----------+
| Net amount due from Lok'nStore | 6,520,831 | 6,520,831 | 6,520,831 |
| Limited | | | |
+------------------------------------+-------------+-----------+-----------+
The amount due from Lok'nStore Limited is interest free. The balance is
repayable on demand, however the Company has no present intention to demand
repayment within one year.
The Group maintains a service agreement for strategic services with Value Added
Services Limited, a company in which Andrew Jacobs and Simon Thomas have a
beneficial interest. Fees are settled monthly and there were no outstanding
amounts due to Value Added Services Limited at the period-end (2008: GBPnil).
The maximum balance outstanding at any time during the period was GBP24,100 (ex
VAT) (2009: GBP24,100).
The Group maintains a retainer agreement for investor relations services with
h2glenfern Consulting Limited, a company in which Robert Jackson (who retired
from the Company on 11 December 2009) has a beneficial interest. The total fees
payable to h2glenfern Consulting Limited are GBP2,000 per month (2008: GBP2,000
per month). There were no outstanding amounts due to h2glenfern Consulting
Limited at the period-end. The maximum balance outstanding at any time during
the period was GBP6,000 (ex VAT) (2009: GBP6,000 ex VAT).
The Company has an agreement with Keith Jacobs, a brother of Andrew Jacobs and
Colin Jacobs, for the provision of marketing services and support to the Company
on a consultancy basis. The fees payable to Keith Jacobs during the period under
this arrangement were GBP10,624 (2009:GBP9,185). There were no outstanding
amounts due to Keith Jacobs at the period-end.
21a Capital commitments and guarantees
The Group has capital expenditure contracted but not provided for in the
financial statements of GBP182,214 (Jan 2009: GBP558,770) relating to minor
works at existing stores.
21b Bank borrowings
The Company has guaranteed the bank borrowings of Lok'nStore Limited. As at the
period-end, that company had gross bank borrowings of GBP28.1 million (January
2009: GBP27.6 million).
21c Contingent Liability - Valued added tax
As an ancillary activity, Lok'nStore acts as an intermediary in relation to
supplies of exempt insurance to customers for which it receives a commission. In
November 2007, Lok'nStore originally approached HMRC, on a purely voluntary and
unprompted basis, to request the implementation of a Partial Exemption Special
Method (PESM). Lok'nStore, advised by Baker Tilly Tax & Accounting Limited,
maintained that the standard partial exemption method, i.e. one based on the
values of the various different income streams, resulted in a wholly distortive
restriction of input tax. Lok'nStore remains of the view that revenue is a poor
proxy for the 'use' of the majority of the input tax incurred by Lok'nStore and,
as a consequence, the standard method does not provide a fair result.
Lok'nStore has advanced a number of other proposals and arguments in a bid to
resolve this now long-running dispute. Again, these have been rejected.
Following the formal rejection of the various proposals which were submitted for
a PESM, a local review of the decision(s) was requested which upheld the
rejection of a PESM.
Following an informal approach to Tax Counsel, their opinion on the chances of a
successful outcome of an appeal to the Tax Tribunal was encouraging subject to
the usual caveats. Lok'nStore intends to progress matters with a formal
conference with Counsel.
Position at period-end
On a worst case scenario, the overall liability in relation to input tax claimed
up to the end of January 2010 which may become repayable to HMRC totals
GBP306,681 based on the standard method restriction. Of this GBP189,582 relates
to capital expenditure inputs (Balance Sheet) and GBP117,098 relates to income
statement items. If a special method is agreed, this may give a restriction of
around 1%, in which case the total amount of VAT (plus interest) to be assessed
by HMRC would on the figures above give a special method restriction of
GBP74,091.
On a pro rate basis this potential liability between restricted inputs gives a
liability of GBP49,836, relating to capital expenditure inputs (Balance Sheet)
and GBP24,255 relating to profit & loss items.
Interest would be added to both totals.
It is not impossible that there should be no restriction of input tax incurred
on the basis that the de minimis limits would not be breached on any agreed
PESM.
This remains an ongoing dispute with HMRC and while the outcome at present
remains uncertain it is not considered that any material provision is necessary.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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